Beyond Sole Proprietorship

Posted Sunday, December 8, 2024

Business Formation ServicesAhhhh… what a cute picture. These are not business owners or two accidental sole proprietorship operators. They might be business sellers though. Sarcastically, business ownership does not mean you own a business; it means a business owns you, but that can be a good thing!

Pursuing a passion and making it into a business is a great way of life, but certain foundational steps need to be in place for long-term success. Liability, self-employment taxes, tax planning and estimated tax payments, retirement savings and solo 401k plans, accountable plans, exit strategies, business valuations, etc. are all considerations that many small business owners neglect. LLC? A good old fashioned C Corp? S Corp Formation? Keep it a sole proprietorship? Perhaps a Limited Partnership? We can help.

Business entity selection is important, but it is not cast in stone. Many businesses often start off as one entity type, and then later convert. WCG did just that; we were an LLC until the founding partners expanded ownership to include other partners and employees. At that point it was better to convert to a corporation so that shares may be sold versus member interest.

First, we’ll talk about some basic business entity concepts.

Liability Protection (Fallacy)

Some sole proprietorships are concerned about being sued and therefore they create an LLC. Good or bad? It depends of course. Can I be sued if I take the steps of an LLC formation? Yes. How about a corporation? Yes!

And you can easily lose on a personal level. And while consultation with an experienced attorney is strongly recommended for your unique situation, as business owners ourselves we feel the excitement of the LLC, especially the words “limited liability,” has overshadowed the reality of our litigious society. In other words, if your careless acts, errors or omissions injure someone even though it was under the auspice of your LLC good chances you will be personally named in the lawsuit and held liable as the owner of the LLC. Remember that injury is not limited to just bodily injury; it could also mean financial injury.

Liability Protection (Fallacy)How about corporations?

Officers and directors of corporations are routinely held liable for the actions of the corporation. This is called piercing the corporate veil. Can you say Enron? Piercing the corporate veil typically is most effective with smaller privately held business entities (close corporations) in which a) the corporation has a small number of shareholders, b) has limited assets, and c) separating the corporation from its shareholders would promote fraud or an inequitable result. Sounds like about 99% of the corporations out there, right? Right! LLCs are similar.

Therefore keep in mind that a sole proprietorship versus an LLC or corporation in many liability ways is indistinguishable. Then again, there are fundamental differences that can benefit you (and that we will discuss).

So, what do you do? First, securing a decent umbrella policy, both at the personal and commercial level, is our strong recommendation for liability arising from your acts, errors and omissions. Speak to your insurance agent, but typical umbrella policies are $500-$700 per year. Second, speak to a qualified business law attorney.

We’ve expanded this LLC fallacy in our KB articles.

LLC Formation

LLC FormationThe power of advertising, the ease and the hype have created this fervor surrounding the limited liability company. Do you know what LLC really stands for? That’s right.. Lawyer’s Likely Choice. We like to poke fun at attorneys- creating an LLC is an easy way to get your small business off the ground and it instantly moves you past the sole proprietorship. While there are significant benefits there are many things to consider.

Just like 401k’s are not IRAs, LLC’s are not corporations. The C stands for company not corporation. LLCs file Articles of Formation or Organization… not Incorporation. You don’t issue shares in an LLC nor do you have shareholders. You have members who own an interest (economic or equity, or both). Sorry to be snooty, but there are some strong technical differences.

Quick myth buster- As mentioned above, LLCs do NOT automagically protect you from all lawsuits- limited liability does not mean tort liability. Huge misconception! Do you really think the world would go ’round if your errors and omissions could be wiped clean through an LLC? Nope. Turn the tables for a moment. What if you were on the receiving end of a car accident and the bozo waives some formation documents and says, “You can’t sue me. This is a business car!” We doubt our justice system and our demands for equity would allow that.

You do receive some liability protection. For example, if you sign a contract with an internet provider as a member of the LLC and you are not signing as an individual, then if your business fails your personal assets should be shielded from liability for the internet contract. This is one of the fundamental differences between a sole proprietor and an LLC.

You should always seek the advice of a competent business law attorney.

Entity Formations

This entity formations podcast featuring Jason Watson, CPA, and guests Amanda Rowles and Joseph Bassett of WCG Inc. (formerly the Watson CPA Group) explores basic business entity considerations such physical nexus, economic nexus, LLCs versus corporations, and how this impacts professionals such as attorneys, physicians, accountants, engineers, etc. plus adding other members such as a spouse or children. We also touch lightly on the benefits of an S Corp but we also have a full-blown podcast on that topic alone (stay tuned).

C Corp Formation

Historically C corporations, or just corporation for short, had be created with the guidance of a skillful attorney. Articles of Incorporation needed to be drafted and stock certificates were printed, and the whole thing was a big deal. Today, and thanks to LLCs and the online creation tools offered by most Secretary of States, corporations are just as easy to form as an LLC. Boilerplate Articles of Incorporation and Bylaws are available online, and satisfy most situations out of the gate. However, if you have multiple shareholders beyond you or you and your spouse, then an attorney should be consulted to draft these documents.

S Corp Formation

As mentioned elsewhere, an S corporation does not exist as an entity. Some other underlying entity must exist, such as an LLC or corporation, that then chooses to be taxed as an S Corp. People say “I have an S Corp” all the time… and there is nothing wrong with that, but technically you have some other recognized entity being taxed as an S corporation. You won’t see “S Corp” listed on a Secretary of State’s website. You also won’t see sole proprietorship listed on the SOS website either… and therefore you cannot S Corp elect your sole proprietorship. You need a recognized business entity.

Reducing your self-employment taxes is the main reason business owners want to be taxed as an S Corp. There are some issues such as payroll, corporate tax return requirements and passive incomes. But if you have over $50,000 in net business income after expenses, you might want to give it some serious consideration. Why? You could save about 8% to 10% of your net business income in taxes… so, if you earn $100,000 in your business after expenses, either as a sole proprietorship or LLC, you could save $8,000 to $10,000 in taxes. Does an S Corp make sense? The buttons below will explain more.

Conversely, unless you are guaranteed to make a bunch of money we do not immediately file Form 2553 (S Corp election) to perfect the S Corp formation. Since we can always file a late S Corp election back to the inception of the entity, we commonly do a wait and see. We can also go back to January of the current year if the entity was formed in a prior year. There is no sense lighting all the fires that go along with an S corporation unless you are experiencing net profits. If you lose money your first year or two, an S Corp does nothing except add to your tax preparation bill.

S Corp Election Paperwork

How do you form an S corporation? Technically, how do you create an entity (LLC, PC, etc.) and have it taxed as an S Corp? Let’s talk about it! Latesha Anderson of WCG Inc. (formerly the Watson CPA Group) takes you through forming your business entity including registering with the secretary of state, obtaining an EIN from the IRS, filing Form 2553 (S Corp Election) and other issues surrounding S corporations.

S Corp Questionnaire

Check out our S Corp questionnaire if you need help figuring them out for your business!

S Corp Election

Understand the differences between sole proprietorships, SMLLCs, and S Corporations for taxation.

New S Corp Puppy

WCG can help with payroll for you or recommend tools like ADP or Gusto to simplify the process.

Sole Proprietorship Summary

We just outlined a bunch of different entity types beyond the sole proprietorship. In addition we strongly suggest you read our business entity type selection article for a comparison table as well. In the meantime, here is a summary of the benefits (or lack thereof) of the sole proprietorship-

Employer Identification Number (EIN) Yes, but under your SSN
Bank Account No, but you can get a separate personal checking account
Process Payroll Yes, provided you have an EIN
401k, SEP IRA Yes
Wholesale Transfer of Ownership Yes (provided it is an asset sale)
Partial Transfer of Ownership Nearly impossible (ie, cannot add partners)
Financial Liability Protection None
S Corp Election No
Tax Rate 15.3% + ordinary income tax (10% to 37%)
Ability to Deduct Expenses Same as any other LLC, corporation, etc.
California Franchise Tax No (the one benefit of a sole proprietorship)
Other States Franchise, Business Tax Varies

The California thing is a conundrum. If you just starting out, and have no idea if you will make money, a sole proprietorship might make sense? Why? You still get to deduct all your business expenses and you also get to avoid the $800 annual California Franchise Tax. Often our recommendation is to gain some traction and then re-assess the efficacy of the LLC formation in California. Other states have expensive filing and “pleasure to do business in our state” taxes as well.

Entity Selection and Multi-Entity Arrangements

Should you pick an LLC or a corporation? Good question! What LLC vs. S Corp? Does that make sense? Perhaps.

What about you and another partner… should you consider a multi-entity arrangement instead of one entity? Do you want to split up your business interests so common expenses are split, but company cars and other fringe benefits are handled individually? Maybe! Multi-entity business structures are common among physician groups, financial advisors, insurance agents, and other production-based groups.

Please click on the buttons below for more information on business entity selection and multi-entity arrangements.

Business Entity Selection

Compare business entity types.  Click here for a simple guide to LLCs, corporations, and professional entities!

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Multi-Entity Arrangement

Simplify your business structure without sacrificing flexibility or long-term options.

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Multi-Entity Arrangement

Simplify your business structure without sacrificing flexibility or long-term options.

Adding My Spouse

Should you form an LLC with your spouse? No. Don’t you see enough of each other at the house? All kidding aside, there are two scenarios at play here. First, adding your spouse as an owner and second, adding your spouse to payroll as an employee only. Just because your spouse is an owner does not mean he or she needs a salary, and he or she does not need to be an owner to receive a salary.

We’ll look at ownership first, and touch on the payroll component in a later chapter. Two primary reasons for adding your spouse to the business as an owner are-

  • Leverage the minority owned small business benefits (usually with government contracts).
  • Asset protection through Charging Orders and the associated rules with multi-member LLCs (attorney stuff).

Please note how tax savings or other big “wow” things are not listed. In other words, adding your spouse as an owner only has two super narrow bands of benefits. But if you add your spouse you instantly become a partnership which might require a partnership tax return (Form 1065).

But there are exceptions! S Corp tax returns (Form 1120S) and partnership tax returns (Form 1065) enjoy a substantially lower audit rate (0.4% versus 2-3%, 2017 data). So adding your spouse to your LLC might be worth something to you. And… While the days of simply adding your female spouse in the hope of being labeled a minority owned business are few and far between (governments now want certifications), there are times where adding your spouse makes a bunch of sense. Here is some more reading material-

Adding My Spouse

Read about the benefits of adding your spouse as a business owner.

Learn More

LLC Operating Agreements

Are you considering going into business with a partner other than your wife? Wait! You need to consider some things. What happens if your partner dies? Are you now in business with your partner’s widow… you know, the crazy one that you could never stand in the first place? Or his kids? You need to strongly consider an Operating Agreement that details death and divorce clauses, corporate waste, and first rights of refusal. You must have language that allows the remaining partners or members to buy back the interest but how will the business be valued? What is the dispute resolution process?

What about distributions? You would hate to get phantom income on paper without the cash. Do you require distributions to at least cover the tax consequence? For example, you and your partners decide to keep all the money in the business for growth purposes. Later, you and your partners argue about it and you are the minority interest. Now what? They can freeze you out from distributions but you still receive phantom income on your K-1. Yuck!

There are many many more examples of not-so-good situations. Discussing and deciding on these issues during your LLC formation and not after there is a big pile of money sitting between the owners is ideal!

Also, please keep in mind that with an S Corp formation, you are still operating under the auspice of the underlying entity’s rules. In most cases this is an LLC. So, your S Corp might truly be an LLC taxed as an S corporation such that an Operating Agreement (as opposed to Bylaws) is the governing and controlling document.

We can work with your attorney to draft this correctly. Here is our KB article on things to consider with Operating Agreements-

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Operating Agreements

Learn why an Operating Agreement is crucial for your LLC – how it protects members.

Learn more

Corporation Bylaws and Shareholder Agreements

Operating Agreements govern how the internal workings of an LLC operate, generally combine the aspects of Bylaws and Shareholder Agreements. Bylaws are drafted to provide structure to the corporation by defining the purpose of the entity, the Board of Directors, Meetings among other things. Bylaws can be viewed as a operations manual for the corporation. Shareholder Agreements are optional, but are strongly encouraged when you have more than one shareholder. A Shareholder Agreement is an agreement by and for the shareholders, and outlines certain rights and obligations. For example, in WCG’s Shareholder Agreement, we have provisions for shareholders who want to exit the business; the agreement determines the valuation of the stock redemption and the payment terms for the exiting shareholder.

Again, LLC Operating Agreements generally combine both the internal operations manual similar to Bylaws with members’ rights and obligations similar to Shareholder Agreements into one document.

Deal Structures

One of the common statements we get from clients at WCG is, “I have a guy who is giving me $100,000 to help me start my business.” Our next response is, “Will the guy be an investor, lender or both?” And then stunned silence… which is certainly re-assuring. Not!

There are many ways to handle this, and no one way is always the best. It depends on humans, emotions and personal objectives. Don’t forget the golden rule where the person with the gold makes the rules. As you kick around your LLC formation, here are some ideas-

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Deal Structures

Learn risks of cash businesses and how accounting provisions address financial waste.

Learn more

LLCs and S Corps Book

Shameless self-promotion alert! We have written a dorky book called Taxpayer’s Comprehensive Guide to LLCs and S Corps. Over 300 pages of pure pleasure. It is available online, for free, within our KB articles, or from Amazon and other less than average retailers. Please click on the button below for more information-

LLCs and S Corp Book

Learn the latest tax updates and insights for small business owners in the 2023-2024 Edition.

Learn more

LLC Formation or Incorporation Fees

WCG can do all the LLC or corporate filings with the Secretary of State (for any state), and our fee is $625 plus the state filing fees. We can file your paperwork in all 50 states plus the District of Columbia. If you have foreign owners (ie, not U.S. citizens or non-resident aliens), then our fee is $925 plus the state file fees.

Some states are fast, some still require paper submissions (such as Pennsylvania). Some are slow for no reason, like California. You might also have to file an Initial Report. States such as Nevada and California have an Initial Report Filing requirement and our fee to prepare this filing is $125 plus the state filing fee.

We’ll also obtain your Employer Identification Number (EIN) from the IRS, create an Operating Agreement (for single member LLCs only) and draft an Accountable Plan for expense reimbursements (including the corporate resolution should one be needed). Three documents (Articles of Organization or Certificate of Formation, EIN and Operating Agreement) are required by most banks for a business checking account (some don’t need the Operating Agreement). The Patriotic Act, Bank Security Act and Homeland Security want to clamp down on illegitimate business accounts and financial holdings. This fee also includes your S Corp election should you need it. Please click on the button below to complete a simple digital form and get going!

Business Formation Fees

Learn costs and requirements for your business Setup, and view state formation fees.

Business Formation Worksheet

Use this secure online form to get your business entity formation underway.

Business Formation Worksheet

Use this secure online form to get your business entity formation underway.

Yes, LegalZoom might appear cheaper for your LLC formation. But after you add on all the bells and whistles, our fee is very reasonable. And, you get excellent business consultation by using WCG. Way too often people run out and do the LegalZoom thing, and then need to us to unravel a bad decision and put things back together. That gets expensive really quickly. So, forming a business is not the kind of thing to be stingy on- get solid answers and solid advice from a trusted business consultation and tax preparation firm. We’ve unraveled enough LegalZoom filings to choke a small horse. Do you know what it takes to choke a small horse? A lot.

On the other hand, we see some business owners spending $1,500 for an attorney to create an LLC. Unnecessary! Sure, the attorney needs to eat but let’s be smart with our money. We create business entities all the time. Having said, we are the first to punt on a complicated situation. A trust owning an LLC? A multi-member LLC which requires a robust Operating Agreement? An LLC that deals with alcohol, tobacco, firearms or marijuana? There are a handful of situations where we recommend using an experienced attorney but an LLC formation for your new Amazon reseller business is not one of them.

Don’t forget that WCG also consults with you on how to account for your business transactions, what tax savings strategies to deploy (forget cars, cars usually stink as tax havens), what tax deferral plans to implement such as self employed 401k plans or profit sharing plans, and basic business operations. Small business consultation is what we do, and we do it well by catering to your unique needs. You are not special, but you are unique.

Benefits of Business Formation

Many advantages are available to you when you form an LLC, partnership or corporation, or elect to be taxed as an S Corp. Section 105 Health Reimbursement Arrangements (HRA), retirement contributions and Section 127 Education Assistance are some of the big ones. Avoiding self-employment taxes through an S corporation. Pulling tax-free money out through an Accountable Plan for your home office. All good stuff.

Business Advisory Services

WCG CPAs & Advisors specializes in small businesses who generally have fewer than 25 employees. Why? We want to help people, and more importantly we want to help the business owner directly. Frankly speaking, once a business gets to a certain size management layers get in the way of owner access. Access allows us to ensure the owner(s) are leveraging the most out of their business for themselves and their families.

Because small business is a core competency for us, we have created business advisory service plans which include these really cool things-

Vail Telluride Aspen

2025 Tax Planning and Preparation
Household Tax Projections [more]
Business Tax Projections, PTET Calcs, SALT Workaround [more] Add-On*
Tax Advisory Services, Decision-Making Assistance [more] Limited* Limited*
Small Business Tax Deductions, Optimization [more]
Section 199A Qualified Business Income Deduction Optimization [more]
Estimated Income Taxes (via increased payroll withholdings) [more]
Business Entity Tax Return (Form 1065, 1120, 1120S) [more]
State Income Apportionment, Foreign Qualification, Nexus [more] Add-On Add-On Add-On
Individual Tax Return (Form 1040, joint filing), One Owner [more]
Expat, Foreign Income Calcs (Form 2555, FBAR, Form 8938) [more] Add-On Add-On Add-On
Tax Resolution, Audit Defense [more] Advanced Advanced Advanced
Financial Planning, Calculations, Discussions [more] Add-On Add-On
Situational Tax Law Research (up to 3 hours annually)

Payroll and Accounting Services
Reasonable Shareholder Salary Calculation ( RCReports) [more]
Monthly Shareholder Payroll Processing (includes spouse, kids extra) [more]
Employee Payroll Processing (bi-weekly, direct deposit) Add-On Add-On Add-On
Annual Payroll Processing (W-2s, other filings, up to ten 1099s)
Accounting Services (bookkeeping + analysis, see below) [more] Add-On Add-On Add-On
Quarterly QuickBooks Consulting (QuickStart Launch) [more] Add-On Add-On

Business Advisory Services
Consultation
Business Consultation, Periodic Business Reviews (PBR) [more] Annually Routine Routine
Complimentary Quick Chats (CQC) [more] Routine Routine Routine
CPA Concierge Services [more] Add-On Add-On
Interfacing with Lenders, Attorneys, Financial Planners Routine Routine
Financial Analysis
Fractional Controller (monitoring 3rd party bookkeeping) Add-On Add-On Routine
Quarterly Financial Statements Analysis, Comparisons (Reach Report) Add-On* Add-On*
Annual Cash Flow Management, Analysis [more]
Annual Budgeting, Forecasting, Goal Setting
Annual First Research Reports, Industry-Focused Consulting [more]
Annual National and Metro Economic Reports
KPI Analysis, Benchmarking, Hot Sheets, Trend Analysis [more]
Strategy and Maintenance
C-Level Financial Advice, Strategic Planning (Fractional CFO)
Succession Planning, Ownership Changes Consultation Routine
Annual Business Valuation
Annual Corporate Governance, Resolutions, Meetings Add-On Add-On
Annual Fee* $4,500 $4,980 Custom
Paid Monthly $375 $415 Custom
(prorated based on onboarding date)

The primary difference between Vail and Telluride is business entity tax projections which focuses on state-level taxes such as franchise taxes and pass-through entity tax calculations. See below for more details.

Custom! Unlike the modern day new car packages where you have to spend $8,000 for the moonroof, our Business Advisory Service plans can be customized specifically for you. The array above is simply a starting point. If you need more or less from us, let’s chat about it!

Fees Updated! Our Business Advisory, Investor Patrol and Tax Patrol Service fees were updated August 2024, and we usually hold fees for at least two years (or through December 31, 2026) unless inflation skyrockets back to 9%.

*The Asterisk

Yeah, we all dislike the little asterisk. The gotcha! The fine print! Well, here is one of those situations. Tax projections under our Vail platform does not include business-entity tax projections and payments (California’s Franchise Tax, New Jersey’s BAIT, Portland’s overall madness, NYC, etc.), pass-through entity tax (PTET) calculations and payments, among other things. Not every business entity needs separate tax projections or planning! Texas, No. California, Yes.

Please see our Tax Planning Services page and Master Service Agreement for more information.Our Telluride Business Advisory plan includes entity specific tax projections as we just described plus interfacing with lenders, attorneys and financial planners (yawn). Here is a quickie listing of our tax planning service levels-

  • Tax Projections- simple tax liability calculation based on your projected data. We call this "your facts, your tax." This is included with all advisory platforms (business, tax patrol, investor tax patrol).
  • Tax Advisory- a decision, or a few decisions, needs to be made based on tax consequence. This is project based, and is quoted based on the scope. Advisory engagements receive 90 minutes of tax advisory.
  • Tax Strategy- a series of what-if, scenario based outcomes over several years needs to be analyzed to make decisions today, and along the way. This too is project based and quoted.

Afraid of bait and switch? Yeah, we think that stinks too. Our annual fee for Vail, as an example, is $4,500. What can make this fee go up? The most prominent reason is additional state tax returns (taxing jurisdictions). However, we will detail that in your proposal. Please see our individual and business entity tax return preparation pages for more information.

Quarterly financial statements analysis is an add-on service, however it is included automatically if you use our accounting services.

Sample Advisory Proposal

See a sample of our Business Advisory Services proposal and scope of work.

Master Service Agreement

Our proposals incorporate a Master Service Agreement (MSA) which is legal speak for fine print.

Business Advisory Services

We explain how business advisory is different than tax and investor patrol including tax only engagements.

Tax Patrol Services

We also have Tax Patrol! This is another wonderful tax service for those who don’t need business advisory services or real estate investment support, but from time to time want some love from an experienced tax consultant and business advisor. Have a quick tax question? Need to know the depreciation rules as you buy that new car? Wondering what your April tax bill is going to be in August? Your spouse upgraded to a different job- how is that going to affect things? You received a big bonus- yay, but how will that impact your tax bill?

Keystone Copper Breck
Individual Tax Return Prep (Form 1040, joint filing) [more]
Business Entity Tax Return Prep (Form 1065, 1120, 1120S) [more]
Household Tax Projection [more]
Business Tax Projections, PTET Calcs, SALT Workaround [more]
Estimated Tax Payments Calcs
Tax Resolution, Audit Defense [more] Avanced Avanced Avanced
Complimentary Quick Chats (CQC) [more] Routine Routine Routine
Annual Fee* $1,740 $2,400 $3,360
Paid Monthly $145 $200 $280
(prorated based on onboarding date)

Our Copper and Breck Tax Patrol Services platforms do not include reasonable owner salary recommendations and optimization, including 401k, fringe benefit and health insurance matters as they relate to payroll processing. Should you require these services, our Business Advisory platforms (Vail, Telluride, Aspen) above, like way above, might be a better fit.

Real Estate Investor Services

On one hand we have our Business Advisory Service plans which are very comprehensive yet might contain some services that not everyone needs such as salary optimization, payroll processing, multiple tax planning events, among other things.

On the other hand we have transactional relationships where clients come in each spring for tax return preparation, and that’s all they need. No questions. No tax planning. Just a pile of tax documents and a few discussions later and bada bing bada boom they have a tax return and a nice summer.

Is there an in-between? Boom! We have Investor Tax Patrol which is a fancy add-on to our Keystone Tax Patrol platform above.

Investor Tax Patrol is a wonderful tax service for those who don’t need all the advisory bells and whistles, but desire tax planning and, at times, scenario-based decision making assistance from an experienced real estate CPA and tax consultant. Have a quick tax question? Need to know the depreciation rules as you furnish that new short-term rental? Want to kick around Real Estate Professional designation? Wondering what your April tax bill is going to be in August?

Consider these typical fees for a tax-only engagement for rental property tax return preparation. We'll get into an example in a bit-

Rental Fee Schedule (abbreviated)
Rental Tax Prep, Clean Records (The SRO Template) $100 each
Rental Tax Prep, Complex or Messy Records (disguised disorganization) $200 each
Short-Term Rental Tax Prep, STR Loophole $175 each
Streamlined State Tax Return (in addition to your resident state) $125 to $200
Complex State Tax Return (what makes it complex?) $250 to $400

As promised, let's get into an example. Let's say you have 2 rentals, with one being a short-term rental in another state.

Keystone Tax Patrol $1,740
First Rental Included $0
Second Rental, Short-Term $175
Streamlined Additional State Tax Return $125
Annual Fee $2,040
Monthly $170

Custom! In the past we tried to have a "3 platform" approach to our rental property owners and real estate investors like we do for business advisory and tax patrol above. There is just way too much customization with rentals- one size fits all is great, but rentals are like snowflakes.

Investor Patrol is specifically designed to give you the freedom to call, text or email us without the worry of being nickeled and dimed like other outdated CPA firms. And! We also provide a tax planning event (usually around May, June and July) where we gather up your financial records like paystubs, rental activities, stock sales, etc. and we create a mock tax return projecting your annual income and eventual tax obligations. We are not big on surprises… bad news in August is palatable, yet bad news on April 15 is unacceptable.Let’s not forget that Investor Patrol also includes IRS audit defense for any tax return that we prepare. Please review our full Investor Patrol Services webpage for all kinds of fine print for your consideration. It’s really not that much.

Also, please check out our rental property book titled I Just Got A Rental, What Do I Do? This is our second book. Our first book, Taxpayer’s Comprehensive Guide to LLCs and S Corps, was first published in 2014 and was well-received by small business owners and tax professionals, so we thought a book on rental properties and real estate investments would be equally helpful. So, here we are with our second iteration, or the 2025 edition. We plan to update annually.

Real Estate Professional Status (REPS)

Discover how REPS can avoid passive activity loss limitations and rules.

Rental Property Tax Returns

We take a deeper dive into all the ins and out of rental property tax preparation.

Short-Term Rental Loophole

Take advantage of this tax loophole to deduct rental losses without qualifying as a real estate professional.

Rental Property Bookkeeping

Let us handle the books so you can focus on growing your rental property kingdom.

Real Estate Holding Company

Why holding rentals in partnerships can reduce audit risk and support defensible tax deductions.

Partnership Tax Return Preparation

Learn more about our partnership (Form 1065) tax return preparation.

Our Way of Business

Here are some quickie FAQs to learn more about WCG CPAs & Advisors, and how we do business-

Do you extend a lot of tax returns?

Nope. We have a t-shirt that reads, “Hate extensions. Love our summers.” We file 70% of our tax returns by April 15, and only extend per the client’s request or if there is missing data such as a rogue K-1. We’ll go as quickly as you let us! Also, we don’t have A listers… we prepare tax returns in first-in first-out sequence. Sure, we leave room for emergencies or other issues that allow for jumping the line.

How is Business Advisory different than Tax Patrol or Investor Patrol?

Good question! Our Business Advisory Service plans (Vail, Telluride and Aspen) are more advisory forward like a robust old-fashioned with lots of planning, tax strategies and business consultation to help you make decisions. Our Tax Patrol Services (Keystone, Copper and Breck) are more tax return preparation forward like a refreshing vodka-lemonade with less tax planning, or at least less-intensive planning and consultation.

Investor Patrol Services for our rental property owners and investors is somewhere in-between since real estate is a business like any other requiring more tax planning, strategy and consultation but falls short of needing shareholder payroll planning and processing.

How Often Do We Schedule Meetings?

Up to you! In the past, we would pro-actively schedule quarterly meetings with all Business Advisory, Investor Patrol and Tax Patrol clients, but it was cumbersome for everyone. Today, we generally connect at least 3 times a year in a meaningful way. Once for tax return preparation, once for tax planning and then another for a myriad of reasons (“hey, I am buying a car” or “hey, we sold a rental”). This is all back-filled with emailed correspondence and touch-ups throughout the year. Having said that, with routine consultation offered above, your goal is to extract everything you need from us.

We prefer scheduled meetings over Teams. Check out our CPA Concierge Service as well. Priority boarding. HOV lane. Early check-in.

What Is Your Communication Style?

We rely heavily on emails and text message alerts. However, we do not have an allergy to the telephone. During friendly hours (let’s say 8AM to 7PM including weekends) we will usually call first if we have a question or need clarification.

Having said that, email can be an effective communication tool, and it is especially good for questions that require thought and good for memorializing conversations. While email is a chore for most people it can also be a distraction. Your WCG team is no different.

As such, we have two big rules that you need to be aware of-

  • The tax team, for example, only checks emails on Mondays and Thursdays. While there is no such thing as an accounting emergency, only poor planning, should you be needing a quicker response, then call us! We are committed to responding to your email within 3 business days.
  • Next, if our response to your email inquiry will take more than 5-10 minutes to write, then we will default to either a) picking up the phone and calling you out of the blue or b) sending you a calendar link so we can discuss it. Email is horribly inefficient. Having said that, we leave room for the expat or the person who works challenging hours or the person in a secure military facility, and needs some love from their tax professional but can only do email. But it cannot be the default.

When we have our amazingly productive and efficient conversation via Teams or phone call, we will always send a recap email to memorialize all the goodies. This recap email also gets captured by our workflow software allowing all other team members to view the recap as necessary.

Who Will I Be Working With?

For tax, we have two-person teams so there is always a backup. Teams are assigned based on who first spoke with you, bandwidth and subject matter expertise. We also have accounting, payroll and business formation / governance. As such, you might have 4 people you work with. Yay! The two tax peeps, and if applicable, a payroll peep and an accounting peep (if you are using our Accounting Services team for bookkeeping + analysis). We also have dedicated Client Support and Tax Support teams to… well… support you and the other teams.

Schedule A Discovery Meeting

Are you interested in business advisory services? Just tax return preparation? Do you own a rental property and need assistance? Let's chat!

Request a Meeting with WCG Inc

Let's schedule a 20-minute discovery meeting with one of our Partners or Senior Tax Professionals to understand your tax footprint and objectives, and how WCG CPAs & Advisors might help.

Meeting Request
Text WCG Offices

Text WCG Offices

Need to get in touch through a quick text?  We’ll respond back within a day and get going!

Chat our amazing team

Call Our Amazing Team

Need to speak to a tax professional now? Give us a call 719-387-9800 and we'll get you connected.

Chat with a tax pro

Chat With a Tax Pro

Taxes can be tricky. Chat with a WCG human now and get questions answered.

Additional Business Services

The following are additional business services to get your venture launched and on the way. Some of these are teased out separately as one and done fees like formation and onboarding stuff.

Accounting, Payroll
Monthly Accounting (bookkeeping + analysis) [more] starting at $500 per month
Bi-Monthly Accounting (bookkeeping + analysis every 2 months) starting at $250 per month
Quad-Monthly Accounting (bookkeeping + analysis every 4 months) starting at $175 per month
Annual Compliance Bookkeeping For Tax Return Prep [more] typically $1,200 annually
Annual Accounting starting at $1,800 annually
Rental Property Bookkeeping [more] starting at $1,200 annually
Sales Tax, Personal Property Tax typically $75 per month
typically $150 per quarter
Employee Payroll (direct deposit, bi-weekly) [more] 1 employee, $100 per month
2-5 employees, $175 per month
6-10 employees, $250 per month

Fine Print: Starting accounting service fees are based on 2 bank accounts (one checking account and one credit card is 2 accounts) with less than 250 monthly transactions. Our fee does not include the QBO subscription fee from Intuit. Custom quote is available if you have a lot going on such as third-party integrations (POS, time billing system), accrual accounting method, extensive benefits packages and / or industry specific issues (e.g, job costing in construction). The first step for Accounting Services is to do an accounting assessment with one of our experts to determine scope, service level and ultimate fee (see button below).

Even Finer Print: Employee payroll can be added only if already using our Business Advisory Service plans above (e.g, Vail). Custom quote for more than 15 employees and a referral to therapy or a script for Excedrin.

Business Formation
Articles of Organization or Incorporation, or Dissolution $625 + state filing fee
Initial Report (if required) $125 + state filing fee
Annual Report $350 + state filing fee
Employer Identification Number (EIN) Included
Single Member Operating Agreement (SMLLC) Included
MS Word Templated Bylaws Agreement (Corporations) Included
S Corp Election, Timely Election (made with formation) Included
Accountable Plan Included

Onboarding Fees (one and done)
Payroll Accounts Setup, Transfer, Closing $550 to $650 depending on state
Employee Data Transfer $25 per EE, > 5
Accounting Setup or Transfer (Fractional Controller) [more] Varies
QuickStart, QuickBooks Setup and Support (90 days) [more] $750
S Corp Election, Timely Election (within 75 days) $450
Late S Corp Election Back to January 2024 [more] $600, $1,200 after Jan 1 2024*
Examine Prior Tax Return Included

For late S Corp elections back to January, we have a split fee of $600 or $1,200… and it depends on if we can file your S Corp by March 15. Ideally, we attach the late S Corp election to the tax return and file both electronically. Yay! Conversely, if we cannot file on March 15, we also cannot electronically extend the tax return. As such, when we file in June or July, it is now considered late. We can usually have the penalties abated, but it takes effort hence the additional $600 fee (the $600 v. $1,200). Be a hero, and get us your stuff right away to save a few bucks and trim down the anxiety.

Business Maintenance
Entity Relocation Package (payroll closure and opening, entity move) [more] $800 (some are $1,050) + state filing fees
Address Changes w/o Payroll (IRS, State Dept of Revenue, Secretary of State) $250 + state filing fees
Address Changes with Payroll (above + state and local payroll agencies) $350 to $450 + state filing fees

Our entity relocation package includes closing your current payroll accounts, opening shiny new ones, moving your entity with the Secretary of State (if applicable) and updating addresses as necessary.

Speaking of address changes… these are tough. Basic address changes require IRS, State Department of Revenue and Secretary of State notifications. Address changes that include payroll add another level of complexity since departments of revenue are not the same as departments of labor, and there might be local or municipal agencies as well.

Accounting Services (Bookkeeping)

Best reason to use a small business accountant is to allow you to do what you do best with your time.

Accounting Assessment

Learn how WCG can help you with your Accounting Assessment needs.

Reasonable Shareholder Salary

Determining a reasonable shareholder salary and reasonable officer compensation is the murkiest part of running an S corporation.

Business Formation

Business entity selection is important, but it is not cast in stone. Many businesses often start off as one entity type, and then later convert.

Address Changes are Messy

A lot of small business owners, especially solo operators, work from their home office.

Late S Corp Election

The S Corp election takes your LLC (or PLLC or C Corp or PC) and changes the way it is taxed to reduce self-employment taxes. The underlying entity remains intact. Only the way it is taxed changes.

Advisory Services Fine Print

A la Carte

A la Carte fee ranges are approximates. 80% of our clients fit into our published fees, but there are outliers. We have a handful of clients with over 30 rentals; their individual tax return is north of $4,000. We also are assuming one state; if your business spans the galaxy then additional fees will be discussed with you prior to payroll setup or tax return preparation. Typically, each state or tax jurisdiction is around $250 to $350 for tax preparation since it affects both your business and individual tax returns (frankly, state apportionment is a pain in the butt, but it is our pain… and states, especially California and New York, are crazy about it).

Prorated Fees

Some more things to consider- when a partial year remains, our usual annual fee is decremented to not charge you for services you didn’t use such as payroll processing. However, a large chunk of our annual fee is tax return preparation which is typically a built-in fixed amount of $2,300 (both business entity and individual tax returns) plus annual tax planning. Whether we onboard you in January, July or December, we have to prepare a full year tax return. This increases the monthly fee for the remaining months of 2024 but the monthly fee will later decrease in January of 2025 to reflect the amounts above. Yeah, we make it sound like 2025 is just around the corner.

Payroll Processing

We make very little profits on payroll processing… we offer it as a convenience to our clients. One throat to choke with a single call can be reassuring but if you want to run your payroll, go for it! Everyone thinks payroll is a piece of cake; write a check and done. Nope… we see a lot of mistakes being made by small business owners especially the handling of self-employed health insurance and HSA contributions since there are special rules for greater than 2% S Corp shareholders. Then again, we don’t mind fixing what was broken.

Tax Returns

You can prepare your own individual tax return as well… but the benefit WCG preparing both individual and business tax returns is that can we slide things around depending on income limitations, phaseouts, alternative minimum tax (AMT), Section 199A deduction optimization, pass-through entity tax deductions (PTET), etc. Having our arms around both worlds can yield some good tax savings!

Note: An individual tax return is what the IRS calls Form 1040 and refers to the entity filing the tax return (you, the individual, are the entity). However, a married couple are deemed to be one entity for the sake of an individual tax return. So, when we say we will prepare your individual tax return, it is meant to include your spouse in a jointly filed happy happy joy joy tax return.

Break-Even Analysis (does an S Corp make sense?)

Break-even analysis is based on our annual fee of $4,500 for our Vail package. If an S corporation saves you 8% to 10% (on average) in taxes over the garden-variety LLC, then $4,500 divided by 9% equals $50,000 of net ordinary business income (profit) after expenses and deductions.

This doesn’t factor in the lower audit rate of S Corps versus Schedule C activities, plus the ability to use business funds to pay for your state income taxes otherwise known as the Pass-Thru Entity Tax Deduction (PTET) or the great SALT workaround.

More sales pitch! Keep in mind that our fee of $4,500 includes your individual tax return which you might already be paying another tax professional to prepare. WCG CPAs & Advisors has a handful of clients who are right at the break-even point of $50,000 but leverage an S Corp and our services to get tax return preparation, tax planning and consultation.

No BS

We are not salespeople. We are not putting lipstick on a pig, and trying to convince you to love it, even if Tom Ford’s Wild Ginger looks amazing. Our job remains being professionally detached, giving you information and letting you decide.
Moreover, many CPAs and tax professionals thrust their risk aversion onto their clients. This is bad. At WCG CPAs & Advisors we must perform our due diligence and hurdle our ethical and professional standards. However, after those gymnastics we present a risk-based analysis to the tax return and let you, the client and taxpayer, decide how to proceed. Having said that, we don’t entertain tax scammers or those who can take down the ship. Arthur Anderson anyone? No thanks.

We also see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. Just because you can complicate the crap out of your life doesn’t mean you must. Just like Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea.

Next Steps

Here is a brief summary of the next steps should you want to engage WCG with Business Advisory Services or Tax Patrol-

  1. We schedule an appointment to discuss your needs and ensure that we have the proper resources to help you.
  2. We draft a proposal outlining the scope of services and our fixed annual fee.
  3. If necessary, we schedule another appointment to review the proposal and perhaps tighten things up or make changes.
  4. Once the proposal is signed, the fun begins with onboarding. We have an extensive checklist and internal task list to properly onboard you and your business. Some things are concurrent (such as gathering housekeeping docs and setting up payroll) and some things are sequential (for example, collecting financial data and then offering salary recommendations and creating a tax plan). Onboarding is like having a baby; a SWAT team shows up and does a zillion things, and poof, everyone is gone except for mom and baby.
  5. After onboarding (usually 4-6 weeks), things settle down into a rhythm- Tax preparation in the spring, tax planning in the summer, with payroll and routine consultation bouncing along throughout the year.
cpa services

New S Corp Puppy

Your corporation or LLC taxed as S Corp shouldn’t change much but there are some gotchyas.

tax agents near me

Periodic Business Review

WCG are business consultants first and accountants second.

tax consultant near me

Late S Corp Election

Late S Corp election can easily be done well into 2025 for 2024 but there are hiccups.

Our Business And Rental Expertise

As mentioned elsewhere we primarily focus on small business owners and their unique consultation and tax preparation needs. With over 60 full-time consultation professionals including Certified Public Accountants, Enrolled Agents and Certified Financial Planners on your team, WCG CPAs & Advisors consults on custom business structures, multiple entity arrangements, S corp elections (even late S corp elections back to January), tax strategies, business coaching, industry analysis, executive benefits, retirement planning including individual 401k plans, exit strategies, business valuations, income tax planning and modeling, and tax representation.

We also work with business law attorneys for business owners who have additional needs such as drafting Operating Agreements, fee for service contracts, buying or selling a business including employee stock ownership plans and partner buy-ins. In addition, WCG coordinates with third party plan administrators create age-based profit sharing plans and cash balance (defined benefit) plans. We can run point on whatever your business needs to ensure that communication is effective and efficient allowing you to sell widgets.

Here are some additional resources you might find useful.

Periodic Business Review

Yes, you want to get a little extra from your hard work and you want this to be tax-advantaged.

Tax-Planning-Strategies

Tax Planning

Accurate estimated tax payments come from proper tax planning. There is nothing worse than the fear of the unknown since most human responses will be the worse case scenario.

Business Tax Deductions

Learn more about how WCG can help you with business tax deductions.

Online Accountant

WCG has been remotely preparing tax returns since 2007 using secure online client portals, text messaging, videoconferencing, and other technologies.

Tax-Planning-Strategies

Business Support Portal

Everything you need from small business tax preparation to S Corp elections to payroll to accounting is located here. Need consultation?

Tax Center

Tax Center

Welcome to the Tax Center Portal! Everything you need from tax return preparation for your small business to your rental to your corporation is here.

WCG CPAs & Advisors is a full-service yet boutique progressive tax, accounting and business consultation firm located in Colorado serving clients worldwide.

Business Valuation

Jason Watson, CPA, CVA is trained by the American Institute of CPAs and the National Association of Certified Valuation Analysts (CVA) for Business Valuation. Jason has represented several buyers and sellers in business acquisitions, and has helped divorcing couples value a small business for divorce property settlements. When performing business consultation and business valuation services under engagement, his hourly fee is $350 with a retainer of $5,000 to $8,000 depending on the complexity of the case. Depositions and trial testimony are $450 per hour (possibly with an additional retainer).

Additional Fees

We also have a short list of additional fees that might be incurred depending on your tax and accounting situation, and your level of readiness-

Various Things
Copying and returning of original tax documents $45
Significant changes or additions after a preliminary tax return is prepared- “crud, let me re-work all my numbers.” $250 / hr
Tax resolution $500 retainer,
$250 / hr
Tax representation and audit assistance; typical case is resolved in two 2-hour sessions $750 retainer,
$250 / hr
Lender or “comfort” letters $250 to $600
Business Valuations $5,000 – $8,000 retainer,
$350 / hr
Divorce Analysis, Litigation Support $250 / hr,
$350 / hr for court
Client Support, Administrative billable rate $150 / hr
Accountant billable rate $150 / hr
Supervisor billable rate $250 / hr
Manager billable rate $300 / hr
Partner billable rate $400 / hr
Managing Partner billable rate $450 / hr
Senior Partner billable rate $475 to $525 / hr
40-minute advanced initial consultation (click to schedule) $250 (credited back to you)

Wow! We really belabored the heck out of those hourly rates there at the end, didn’t we? All in the interest of tax preparation fee transparency of a growing firm.

Also! Please keep in mind that we pride ourselves in not being the nickel and dime type of tax and accounting firm. Typically, we can offer a fee range or a maximum limit for our services and fees to keep your tax prep cost where you want it. This is what we do all day, every day! We have a solid understanding of what it takes to complete a project successfully.

Value Proposition

The people at WCG are business consultants, not just number crunchers. Anyone can balance a checkbook. Anyone can print a paycheck. Anyone can put the right number in the right blanks. But we take a consultative approach to your small business. You can always find someone to do it for less- of course. However consider the solid business services and consultation support which you will get with WCG that other accounting firms might not provide. Read more about our Value Proposition here.

Talk to us today to not just get started, but to get started on the right track… that might be your basic sole proprietorship or it might be a complicated multi-entity structure with all kinds of arrows and other craziness.

Tax Planning Season

Tax planning season is here! Let's schedule a time to review tax reduction strategies and generate a mock tax return.

Tax Planning Services
Bookkeeping Services

Tired of maintaining your own books? Seems like a chore to offload?

Accounting Services

Professional Consultation

Did you want to chat about this? Do you have questions about Business Formation? Let’s chat!

The tax advisors, business consultants and rental property experts at WCG CPAs & Advisors are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.”

Let’s chat so you can be smart about it.

We typically schedule a 20-minute complimentary quick chat with one of our Partners or our amazing Senior Tax Professionals to determine if we are a good fit for each other, and how an engagement with our team looks. Tax returns only? Business advisory? Tax strategy and planning? Rental property support?

Text WCG Offices

Text WCG Offices

Need to get in touch through a quick text? We'll respond within a day.

Chat our amazing team

Call Our Team

Need to speak to a tax professional now? Give us a call 719-387-9800 and we'll get you connected.

Chat with a tax pro

Chat With a Tax Pro

Taxes can be tricky. Chat with a WCG human now and get questions answered.

After almost 6 years with this CPA group, there is NO ONE else we would trust to do our taxes.

L. Matisek

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We've worked with multiple bookkeepers and accountants over the years and WCG has completely blown us away.

N. Sellden

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As a novice business entrepreneur they provided me with the tools to both structure and tax my business efficiently

Mayon Hight

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They've made my taxes a breeze and are worth every dime I pay them for the peace of mind their services provide.

Lynn Shannon

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The good folks at WCG have impressed me, as being highly competent, patient & friendly.

Fred LeBlanc

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They've made my complicated business life simple and I'd recommend them to anyone with a slightly complicated-to-overwhelmingly complicated tax strategy!

Nic J

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For nearly nine years, I have had the privilege of working with WCG and their team of exceptionally knowledgeable and experienced CPAs.

Alex Hickman

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Amanda - WCG CPA - You guys have been invaluable in helping us get this business and tax planning setup properly and executed correctly.

Lance Dodd

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WCG is extremely knowledgable, timely and attune to the unique aspects of our businesses.

Carl Protsch

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WCG CPAs are professional and a pleasure to work with.

Nakapan P.

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They go beyond the call of duties to assist me not only with Tax return matters but with any questions on other personal and company tax matters.

Juan Mayorga

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I've always dreaded tax season, but WCG has made things so easy, even as we changed to an S corp. So happy we found them!

Paige de Kock

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It was great to find an accounting firm eager to take on new clients, answer initial questions in depth, and support our “keep it simple” philosophy.

Stuart B.

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Working with WCG was so easy, shout out to Sally Rhoades who handled my complicated tax situation this year wonderfully and was available for all my questions.

Stefani Cinto

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I am so thankful to be a client of WCG CPAs & Advisors.

Carol Kersten

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It's a wonderful and rare treat to find a company like WCG these days with their high level of service, personal approach, and deep knowledge of accounting.

Jeffree Hilton

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Such a great firm. Great communicators, great attention to detail and overall great people.

Jeff Owens

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